Anthony Hilton: Algy Cluff to the rescue with coal gasification

Cluff Natural Resources is a business which proposes to exploit the under-sea coal reserves (Photo: Getty) Getty

Forty years ago Algy Cluff was famous as one of pioneers who discovered oil and gas in the North Sea.

Now, after a long diversion looking for gold and other minerals in Africa, he is back.

Last Friday the Government announced it had granted his latest company the AIM-listed Cluff Natural Resources no fewer than 11 licences to look for gas.

There are reasons the wheel has turned full circle.

It was the entrepreneurs rather than big oil who made the initial finds 40 years ago and they tended to sell these onto the giants who had the resources to develop them; now with reserves running down and the easier fields almost worked out, it takes imagination and lateral thinking to discover the remaining pockets of viable hydrocarbons. As the majors move out, the entrepreneurs are coming back in.

But if Cluff is naturally delighted by this vote of confidence it was an announcement yesterday which points to his more intriguing activities.

The other side of Cluff Natural Resources is a business which proposes to exploit the under-sea coal reserves — which are vast — not by mining them in the conventional way but by converting them in situ into gas, and piping this ashore.

It is less science fiction than it sounds. Until the arrival of North Sea gas in the Seventies, every town and city used to have a gas plant where coal was converted into gas for domestic use — hence the vast gasometers for storage such as the one which still stands adjacent to the Oval.

But rather than mining the coal and converting it to gas on the surface, today’s technology allows the process to be carried out at source so that the gas is extracted without having to mine the coal. In addition, the horizontal drilling techniques developed by the oil industry allow under-sea coal which has proved too deep or dangerous to be mined conventionally to be reached from dry land.

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Yesterday’s announcement was an encouraging a progress report on the size and quality of coal reserves on his acreage underneath the Firth of Forth and therefore close to potential customers in Grangemouth petrochemicals plant and Longannet power station.

The report says that the immediately exploitable part of the resource is the energy equivalent of 1395 billion cubic feet of natural gas (to put this in perspective, one billion cubic feet would meet the energy needs of 11,000 homes for one year and is the equivalent of the annual output of 49 of the largest onshore wind turbines).

Underground gasification facilities operate successfully in other countries but it will still take time before Cluff gets the finance and permission to develop one here. That said, it looks a lot better bet than fracking as a way to meet the UK’s demand for gas as the North Sea runs down.

Unlike fracking, gasification in situ requires just one or two rather than dozens of drill holes, it does not need billions of gallons of fresh water, does not require underground explosions to release the gas, nor uses any toxic chemicals which could leach into the water table. And there is enough coal in the UK to meet our energy needs in this way for 2000 years.

By coincidence, Amara Mining — the business which inherited what remained of Cluff’s gold business — is also making interesting progress. Headed now by John McGloin, it has spent the past couple of years evaluating a major find in West Africa’s Côte d’Ivoire, and — largely because the gold price has collapsed in recent months — no one seems to have paid much heed to the very promising results.

There are several things to catch the eye in addition to the quality and accessibility of the deposit, the main one being that mines use prodigious amounts of energy and this usually accounts for at least half the cost of a mining operation, the more so as, in remote locations, electricity has to be generated on site.

But Amara’s find is close to an existing hydroelectric facility which means its energy cost will be just a quarter of the norm and that, combined with the geology, indicated that the mine would be profitable with a gold price down around $800.

Ironically it also helps that the gold price has collapsed because this has reduced dramatically the demand for and cost of drilling and the other geological services.

McGloin is in the happy position therefore of building his mine at the bottom of the cycle when costs are low, in the hope, obviously, that by the time the facility is in production the price will have recovered.

A bit like Cluff’s gasification, this is all still a bit into the future and there is always the possibility that things will go wrong.

But everything so far has been encouraging. McGloin plans another progress report and further economic assessment next month and is working towards producing a bankable study by the end of next year — at which point he will go looking for finance and partners to bankroll the move into production.

Obviously both ventures are highly risky but that, in part, is what capitalism is all about. Sitting in the comfort of our more secure and conventional jobs, the rest of us can take heart from the fact that there are people in this country willing to take these chances and that we have a stock market which has been willing to finance them.